Labor to pressure banks into opening old cases

"That's an issue that we are obviously going to have to work through in practice in future to make sure that the judgments in court can sit in tandem with any compensation scheme, " Mr Dreyfus said.

Ms O'Neil said her dealings with the banks and the financial services sector showed her there was a desire to put things right for customers and did not expect the banks to push back on its recommendations.

"I think what has amounted to abuse of the law in court cases in the past is a matter that is of concern to bank CEOs and I do believe there will be instances, in some limited circumstances, where the banks will allow us to look at areas where a manifest injustice has occurred."

Shadow Minister for Financial Services Clare O'Neil said there were obvious issues with revisiting old court cases. JOEL CARRETT

Last week, Australian Banking Association CEO Anna Bligh noted that the concept of revisiting old cases and granted customers further avenues redress had been explicitly rejected by both Commissioner Kenneth Hayne and the Ian Ramsay review of external dispute resolution schemes.

Mr Dreyfuss and Ms O'Neil appeared in Melbourne on Tuesday to announce more detail on the allocation of funds raised by a $640 million levy on the banks.

The first $320 million will be used to double the number of financial counsellors in Australia from 500 FTEs to 1000. The next $120 million will be used to hire 200 financial rights lawyers. It is speculated the final $160 million will be used to fund financial rights services for small business.

Ms O'Neil said there was a "fundamental mismatch" between the resources of big banks and ordinary consumers that would never be changed by government programs, highlighting the need for better laws to protect consumers.

Under Labor's policy the compensation caps for customers who have been wronged by their financial services provider will be quadrupled from $500,000 to $2 million and the $5000 cap for financial loss will also be lifted to $2 million.

The Australian Financial Compliants Authority (AFCA) noted the policy announcement and said any changes to its mandate would require a period of consultation and approval from ASIC.